Market Snapshot* DJIA
18867.93
-35.88
5321.51
-12.45
Nasdaq S&P 500 10-Year
Friday, November 18, 2016
2181.9
-5.21
2.3369%
-16/32
30-Year
3.0142%
-16/32
Euro
$1.05935
-0.0031
$45.69
+0.26
Nymex Crude
Source: SIX Financial Information, ICAP plc *preliminary values subject to adjustments
Stocks The election-fueled stock rally moderated this week, with U.S. stocks retreating from near records Friday.
Treasurys The U.S. government bond rout deepened Friday, with the yield on the benchmark 10-year note closing at a 12-month high and logging the biggest two-week gain in 15 years. The yield on the 10year Treasury note settled at 2.337%, up from 2.278% Thursday. Yields rise as bond prices fall.
Forex The U.S. dollar extended its rally Friday, remaining at its highest level since 2003 as investors bet U.S. growth and interest-rates will rise. The ICE Dollar Index, which measures the dollar against six peers, was up 0.3% to 101.18.
Commodities Oil futures wavered between gains and losses Friday, with volatility expected ahead of a meeting later this month of major oil-producing countries aiming to strike a deal to cut output and stabilize prices.
Tomorrow’s Headlines
Trump Taps Loyalists For Cabinet Security Posts President-elect Donald Trump announced Friday he would appoint Sen. Jeff Sessions (R., Ala.) as attorney general and Rep. Mike Pompeo (R., Kan.) as director of the Central Intelligence Agency, turning to figures considered outside the GOP establishment to begin filling his cabinet. Mr. Trump also announced Friday he would appoint retired Lt. Gen. Michael Flynn as his national security adviser. Mr. Flynn joins Reince Priebus, who will be chief of staff, and Steve Bannon, who will be chief strategist, as White House advisers who can begin working for Mr. Trump without Senate confirmation, as is required for cabinet posts. On Thursday, Mr. Sessions, one of Mr. Trump’s first supporters on Capitol Hill, told reporters, “I’d be honored to be considered” for a cabinet-level post, but that “Mr. Trump will have to make that decision.” The Alabama Republican is a former U.S. attorney who was first elected to the Senate in 1996. Mr. Pompeo, a former Army officer and Harvard Law School graduate, was first elected to Congress in 2010 as part of the tea party movement. He would likely bring a sharp change in tone to the CIA. Mr. Pompeo has been one of the harshest critics of the Iran nuclear deal that the U.S. and several Western countries struck last year.
UAW, Ford To Meet After Trump’s Tweet on Production Plans Leaders of the United Auto Workers union plan to meet with Ford Motor Co. Friday, after being taken by surprise by a tweet from President-elect Donald Trump disclosing the auto maker had shelved plans to move production of Lincoln sport-utility vehicles from the U.S. to Mexico, people familiar with the matter said. Mr. Trump wrote in the late-night Twitter posting on Thursday that he had received a call from Ford Chairman Bill Ford assuring him the U.S. auto maker would keep Lincoln production at a plant in Louisville, Ky. While the plant builds higher-volume Ford Escapes along with the Lincolns and wasn’t actually slated to close, the auto maker confirmed it reversed course on its plan to move a smaller-volume Lincoln SUV production to Mexico at a later date. For the UAW, retaining production of even lower-volume nameplates is a priority, partially because it provides a hedge if the market should shift away from one of the other products UAW workers assemble. continued on page 2
Monday’s Calendar 8:30 a.m.
Oct Chicago Fed National Activity Index NAI (previous -0.14), NAI, 3-mo Moving Avg (previous -0.21)
N/A
U.S.-China Joint Commission on Commerce and Trade meeting
N/A
Obama returns to U.S. following Greece / Germany / Peru trip
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Friday, November 18, 2016 4 p.m. ET
Tomorrow’s Headlines
approach to prosecuting smaller infractions as a means of deterring bigger frauds.
continued
Facebook Fends Off Crises With Confidence Facebook Inc.’s growing clout has spawned a series of prominent controversies—and increased confidence in staring them down. The flaps extend from its core social network—which has gained so many users that it is now central to discourse in the U.S.—to areas well beyond its original purpose of keeping family and friends in touch, such as selling virtual reality gear and expanding internet access to poor and rural areas. Facebook’s leadership has responded with unwavering confidence punctuated by occasional contrition—as in the case of recent ad metrics problems. Chief Executive Mark Zuckerberg’s stalwart defense of the company has at times met with internal dissent as well as outside complaint. In the past several weeks, Facebook has defended itself against criticism that its platform fueled misinformation and division in the presidential election, assuaged advertisers after inflating user metrics, and reversed a decision on censoring its content after a public spat with the prime minister of Norway. Those followed flare-ups earlier in the year over perceived liberal bias in its “trending topics” feature and claims of cultural insensitivity around the launch of its Free Basics service in India.
Head of SEC Calls for New Laws to Help Police Wall Street Securities and Exchange Commission Chairman Mary Jo White said on Thursday new legislation could help law enforcement go after senior executives for misconduct that happens at their firms, adding to a growing chorus of law enforcers calling for more tools to police Wall Street. “Given the seemingly intractable persistence of serious corporate wrongdoing, the time for deciding whether to impose greater accountability, by expanding the reach of our laws, would seem to be at hand,” Ms. White said Friday at New York University School of Law, according to the text of her remarks. Her remarks come weeks after the special inspector general for the Troubled Asset Relief Program, Christy Romero, asked Congress to require chief executives to certify annually that they found no fraud within their organizations. Ms. White, who is slated to leave the agency in January, oversaw a record number of enforcement actions in her three years at its helm but had no marquee case that made critics forget the agency’s failure to root out fraud before the crisis. The agency under her direction pursued high-profile cases against private-equity firms and dark pool trading venues, and took a “broken windows”
DraftKings, FanDuel Agree to Merge Two major daily fantasy sports sites, DraftKings Inc. and FanDuel Inc., said they have agreed to set aside their bitter rivalry and become one as they face down regulatory and legal challenges to their business. The two companies, which together spent upward of $500 million on advertising last year to try to build unique brands, had been talking about merging for months, with those talks accelerating in the past few weeks. As expected, DraftKings Chief Executive Jason Robins will serve as CEO of the new company, while FanDuel CEO Nigel Eccles will be chairman. The new board will also comprise three directors from FanDuel, three from DraftKings and an independent director, with the company’s headquarters divided between New York and Boston offices. The deal is expected to close in the second half of 2017.
Brookfield Pushes for TerraForm Power Deal Brookfield Asset Management has hung a possible price tag on its proposed takeover of TerraForm Power Inc., at $13 per share, a penny under Thursday’s market closing price. The overture from Brookfield and its deal ally, the hedge fund Appaloosa Management, spurred a slight uptick in trading in TerraForm Power, a publicly traded “yieldco” that owns renewable energy assets, which gained about 3% in the hours after the Friday announcement with the Securities and Exchange Commission. Brookfield has been openly pursuing TerraForm Power since June. In a letter emailed Thursday to the independent directors of TerraForm Power, Brookfield urged swift action to stay ahead of bondholders, and, potentially, bankruptcy.
Chipotle, Ackman Near Settlement On Board Chipotle Mexican Grill Inc. and William Ackman are nearing a settlement that would give the activist investor a say in the boardroom at the beleaguered burrito chain. The Denver company and Mr. Ackman’s Pershing Square Capital Management LP, which disclosed a 9.9% stake two months ago, have been discussing changing the board and could reach an agreement soon, according to people familiar with the matter. A deal isn’t assured and could be delayed or fall apart, they said. Both the company and Mr. Ackman say they’ve had a cordial relationship. A settlement could head off a potentially expensive and distracting public fight over the board, which shareholders, analysts and governance experts say hasn’t properly
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continued on page 3
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Friday, November 18, 2016 4 p.m. ET
Tomorrow’s Headlines
company estimates that only 30 vehicles may have leaks, but the recall is needed to find them.
continued performed its role of overseeing and guiding management, especially during a food-safety crisis that has hobbled the company’s sales and performance for over a year.
McDonald’s Table Service: Fast Food Redefined More McDonald’s Corp. customers across the U.S. will be able to choose table service inside restaurants, in an attempt to provide something beyond what a traditional fast-food chain offers. It is part of an effort central to revive the burger giant’s sales, which have flagged in recent quarters. Franchisees and analysts have been wondering what else McDonald’s would do to drive interest in a brand that has been struggling to re-establish its relevancy in a market where consumers have more choices than ever to get food, including burgers. The company that derives nearly 70% of its sales from the drive-through is hoping changes to the restaurants themselves will help lift sales, according to McDonald’s USA President Chris Kempczinski.
Owners will be notified by mail starting Dec. 19. Meanwhile, Fiat Chrysler says owners should be alert for fuel leaks and contact dealers if they spot one.
Republican Lawmakers Eye Freeze On Obama Regulations Republican lawmakers are preparing to brandish a littleused legislative weapon early next year to try to squash a number of Obama-era regulations, once President Barack Obama is no longer in office to defend them. The two-decade-old Congressional Review Act has so far been invoked successfully only once to overturn a regulation. But unified Republican control of Capitol Hill and the White House in 2017 gives the party an opportunity to use it more freely, since President-elect Donald Trump would be unlikely to veto a measure passed by lawmakers to roll back rules written by his Democratic predecessor.
Conference Board’s Leading Economic Index Up In Oct A basket of leading economic indicators increased slightly in October, a sign that U.S. economic growth would continue in the coming months.
Eurozone Inflation Still Too Weak, ECB’s Praet Says
The Conference Board’s leading economic index rose 0.1% last month, following a 0.2% increase in September and a 0.2% decline in August.
The European Central Bank’s chief economist Peter Praet warned on Friday that eurozone inflation remains too weak, and said the ECB is determined to keep its stimulus measures in place until it hits its inflation target.
The reading matched expectations; economists surveyed by The Wall Street Journal projected a 0.1% gain.
Speaking in New York, Mr. Praet—who sits on the ECB’s six-member executive board—said the Frankfurt-based central bank is “fully committed to preserving the very substantial amount of monetary” stimulus until inflation rises in a sustainable way. The comments echo those of ECB President Mario Draghi, who said earlier Friday that the ECB “cannot yet drop [its] guard.”
Fiat Recalls Vehicles For Fuel Leak, Wiper Problems Fiat Chrysler is recalling nearly 89,000 cars and SUVs to fix possible fuel leaks or problems with windshield wipers. The most serious recall covers nearly 35,000 Dodge Durango and Jeep Grand Cherokee SUVs world-wide from the 2016 model year. All have 3.6-liter V6 engines. A fuel tube may have been damaged in manufacturing, and that could cause a gas leak and fire. Fiat Chrysler says an employee found a leak in one vehicle and no fires have been reported. Dealers will replace fuel injector rails and lower intake manifolds if needed. The
Comprised of 10 components, including initial claims for jobless benefits, factory order and the S&P 500’s price change, the index is intended to signal swings in the business cycle and to smooth out some of the volatility of individual indicators. The increase was driven by the interest rate spread and higher average weekly hours offsetting weaknesses in unemployment insurance claims and new orders.
Gazprom Cuts Staff by 20% In London Trading Business Gazprom has made deep cuts to its London-headquartered trading business, in an early sign of the Russian gas giant’s attempts to adjust to continued weakness in commodity markets. Gazprom Marketing & Trading, a subsidiary of Gazprom Group, has cut staff numbers by around 20%, including at least six directors, two people familiar with the matter said. The unit anticipates a massive fall in some of its divisions’ profits this year, which come from trading oil, gas and other commodities, these people said. Like other energy majors, Gazprom has been hit by weak oil and gas prices, but the company is also battling
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Friday, November 18, 2016 4 p.m. ET Copyright Dow Jones & Co., Inc.
Talking Points
Tomorrow's News Today is made available as a complimentary service to Dow Jones News Service paying subscribers. No further redistribution is permitted without written permission from Dow Jones. Tomorrow’s News Today is intended to provide factual information, but its accuracy cannot be guaranteed. Dow Jones is not a registered investment adviser, and under no circumstances shall any of the information provided be construed as a buy or sell recommendation or investment advice of any kind.
Democrats Stuck On The Coasts
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Republican America is now so vast that a traveler could drive 3,600 miles across the continent, from Key West, Fla., to the Canadian border crossing at Porthill, Idaho, without ever leaving a state under total GOP control. After last week’s election, Democrats hold the governor’s office and both legislative chambers in just six states — all of them on the Atlantic or Pacific oceans — compared with 25 for Republicans. Just a few weeks ago, when Hillary Clinton was leaping ahead in the polls, it seemed as if it would be the Republicans heading for a reckoning. Instead it’s the Democrats who are plunged into a bout of soul-searching about the party’s diminishing footprint, especially among the white working class. The moment has been years in the making, masked by President Obama’s singular ability to knit together a broad coalition of young people, women and minorities. The last Democratic presidential nominee to connect with the working class was Bill Clinton, whose most recent appearance on the ballot was 20 years ago. Al Gore and John Kerry, who each lost to Republican George W. Bush, were both seen as cerebral creatures of an economic and political elite. “The coalition needs to be broader,” said Sen. Mark Warner, a Virginia Democrat. “The Democratic Party has a history that it’s been about working Americans. We cannot be a party of the East Coast, West Coast and metropolitan areas.” Last week’s presidential defeat revealed a Democratic Party that agrees on core principles, but remains divided over which issues to emphasize, how steeply to oppose Donald Trump’s incoming administration and how best to rebuild after years of statehouse losses to Republicans, interviews with dozens of elected Democrats, party activists, and officials at the state, local and federal level show. The party-wide debate is reaching into Capitol Hill and the Democratic National Committee, provoking discord between liberal political activists and the pragmatists in elected office. Meanwhile, Mrs. Clinton’s popular-vote victory has left some top party officials believing they still hold the keys to the electoral promised land, if only they could find the right vehicle to take them there. For decades, Democrats have been losing support from the white working class. In presidential elections of the 1990s, those voters split evenly between the parties. By 2012, white voters without college degrees favored millionaire Republican Mitt Romney over Mr. Obama in all but one competitive state, Iowa. This year, 67% of non-college-educated whites nationwide voted for Mr. Trump, according to exit polls. The Democratic Party’s white working-class base has deteriorated with the diminishing ranks of organized labor. Even within that typically reliable voting bloc, fissures emerged. Exit polls show that 43% of voters in union households went for Mr. Trump, just 8 percentage points behind Mrs. Clinton. The coasts and cities are home to the core coalition of women, minorities and young voters that powered Mr. Obama to two presidential victories, and had been expected to buoy the party for years to come. But without Mr. Obama on the ballot, the disparate elements of the party have lost elections in 2010, 2014 and 2016. Democratic losses have come at all levels of government since Mr. Obama took office and his party controlled Congress. In Washington, it has been relegated to minority status with at least 60 fewer seats in the House and 12 fewer in the Senate. The casualties have been worse in state capitols. continued on page 5 Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com
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Friday, November 18, 2016 4 p.m. ET
Mr. O’Neill said the U.S. and the rest of the world may well benefit from a change in perspective that the presidentelect may bring, including a sharper focus on infrastructure and a review of monetary policy.
Talking Points continued
O’Neill: Trump Can’t Stop The BRIC Economist Jim O’Neill, the creator of the Bric acronym, isn’t seeing the world turned upside down after the surprise election of Donald Trump. In an exclusive interview with The Wall Street Journal late Thursday, the ex-Goldman Sachs Group executive said pundits predicting the end of globalization because a leader hostile to Nafta and the proposed Trans-Pacific Partnership will soon sit in the White House are missing the bigger picture. International trade isn’t necessarily dependent on omnibus trade pacts, he said, while capital, people, goods and ideas will continue their inexorable flow across the globe. Mr. O’Neill said it is too soon to predict how Mr. Trump will govern or how his agenda will shake out. Still, he reckons that Mr. Trump’s actions as president will likely to be more measured than his proclamations on the campaign trail, where the brash reality TV star threatened to slap punitive tariffs on goods from Mexico and China. Igniting a trade war that could end up damaging some of America’s biggest corporate heavyweights “is not logical,” Mr. O’Neill said. Mr. Trump “will talk tough,” but his policies won’t turn out to “be what people expect,” Mr. O’Neill said.
“We needed to think about something different,” he said. While pundits have seized on the surprise victories of both Brexit and Mr. Trump as referendums on globalization, Mr. O’Neill, an expert in international economics, disputes that interpretation. “I think this current populist view that globalization is in crisis and over, I think it is very naive,” he said. “It is almost embarrassing.” Stocks and currencies in emerging markets tumbled following Mr. Trump’s Nov. 8 victory. The real-estate mogul has promised a massive expansion in public works to create jobs and boost the U.S. economy. That has many analysts and economists predicting faster U.S. GDP growth, higher inflation and higher interest rates, expectations that have sent the stock market soaring and the dollar higher. But Mr. O’Neill said the dollar’s surge can’t last forever, and that the developing economies can still thrive in the new environment. Whether Mr. Trump’s election can reset the U.S.-Russian relationship and lead to easing of sanctions remains to be seen. Ultimately “the Bric’s future depends on themselves, not on Trump,” Mr. O’Neill said.
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